Bankruptcies hit year's high in June

by Russ Wiles - Jul. 10, 2008 12:00 AM
The Arizona Republic

Valley bankruptcies in June hit their highest level of the year, pushed up by lingering consumer-debt burdens and contrasting with easing financial strains nationally.

A total of 1,118 individuals and small businesses filed for creditor protection last month in metro Phoenix, representing a near-doubling from 582 filings in June 2007, according to the U.S. Bankruptcy Court in Phoenix.

That raised the first-half total to 5,711 filings from 3,110 Chapter 7 filings, which discharge most debts and provide for a fresh financial start, accounted for nearly 4 in 5 bankruptcies. Chapter 13 debt-repayment plans accounted for most of the rest.

Although resets on subprime adjustable-rate mortgages are expected to peak this summer, thousands of Arizonans may face pressure beyond that.

"I think we'll see a huge influx of bankruptcies in the fall and early winter," said Gilbert attorney Chris Dutkiewicz, noting that many recent filers have been struggling with debt burdens for months.

As a positive, Dutkiewicz hasn't noticed many people seeking protection due to job losses despite a mildly worsening employment situation.

Grim bankruptcy figures also have shown up elsewhere around the state, although the Valley appears among the hardest-hit areas. Compared with the 92 percent spike in Valley bankruptcies in June, the Yuma area had a 62 percent increase and Tucson, 43 percent.

Statewide, bankruptcies rose 76 percent in June from a year earlier. They're up 73 percent for the first six months.

Nationally, bankruptcy filings rose a milder 21 percent compared with June 2007 and actually fell 9 percent from May, reported the American Bankrutpcy Institute and National Bankruptcy Research Center.

For the first half, U.S. filings were up 30 percent over the same stretch in 2007. Subprime-mortgage pressures have been more acute in Arizona and a few other states.

"The overall trend of rising bankruptcies reflects the growing financial strain felt by U.S. households burdened by high debt, rising mortgage costs and falling home values," said the ABI's executive director, Samuel Gerdano, in a statement.